Gamification: More than Just Fun and Games (September 2013)

Adam Perrotta, Assistant Editor

To drive customer education and engagement, financial services providers are applying the concepts of gaming—and it turns out a little fun can drive serious results.

For millions of consumers, payment services offer convenience, empowerment and economic inclusion. One thing they often don’t provide, however, is fun. But that could be changing, with a new concept making waves throughout the financial services and payments world that takes its cues from an activity known for providing enjoyment: gaming. And for many financial service providers, the “gamification” strategy is proving to be a winner.

While “gamification” might conjure up images of blasting video game aliens or launching virtual angry birds through the air, the concept isn’t quite so literal. Essentially, gamification is the act of applying the mechanics and dynamics of game design—including points, levels, competition and rewards—to achieve business objectives. For the payments industry, that means solving key challenges that have long plagued providers, such as how to increase engagement, loyalty and usage by tapping into the elements that make games enjoyable. Gamification is proving to be a powerful tool in driving behavior and, ultimately, increasing revenue.

Mass Appeal

Gamification is gaining footholds in all levels of the financial services industry, from small startups all the way to the U.S. government. In April, the Treasury Department’s Direct Express Debit MasterCard program added the financial capability platform from PayPerks, a New York City-based financial education and rewards program provider. With PayPerks, Direct Express cardholders who receive federal payments, such as Social Security or veteran’s benefits, are offered educational modules about using their cards in the most beneficial and secure way, avoiding fees and other tips. To encourage participation, cardholders receive points for completing each module; the points are converted into “chances” to win a small cash prize in a monthly drawing. The more points accumulated, the higher the chance of winning. The program was a hit right out of the gate with Direct Express cardholders, 50,000 of whom signed up in just the first two months of rollout, completing a total of 300,000 educational modules.

Beyond motivating cardholder education, gamification is helping fill another specific need for Treasury and program partners Comerica Bank and MasterCard. The second phase of the PayPerks rollout with Direct Express will enable cardholders to earn points for specific card activity, such as paying with the card at the POS, thereby increasing interchange revenue—a vital aspect of any payment card, but government programs especially. “Public sector prepaid programs are often very challenging for issuers and program managers,” notes Andrew Gillen, vice president for MasterCard’s public sector programs. “There’s pressure to keep fees low but also provide free access to customer service and ATMs, so costs can be high and the opportunity to recover them through fees is limited,” Gillen tells Paybefore. At the same time, he says, many cardholders tend to withdraw cash instead of paying with the card at POS, thereby limiting interchange revenue for issuers.

“We were interested in making government prepaid programs more economically viable by driving more POS use,” he says. PayPerks furthers that goal by awarding cardholders more points for using their cards in ways that are more beneficial for the issuer, as well as the cardholder—utilizing gamification to drive a desired behavior that adds to the bottom line while increasing cardholders’ financial capability. While the behavior-driven points phase hasn’t launched with Direct Express yet, MasterCard has reason to be optimistic. An earlier prepaid pilot the network undertook with PayPerks resulted in quadrupled POS usage.

At the other end of the spectrum from the sizable U.S. Treasury program, a number of small firms and startups have woven gamification into their products. SmartyPig, an Iowa-based online savings platform, enables users to set savings goals and measure their progress socially. Friends and family can see the progress and contribute funds, providing recognition—another key gamification tenet. Finally, when the goal is reached, SmartyPig kicks in a bonus percentage as a reward.

Since its founding in 2008, the company has helped users reach more than $3 billion in saving goals—and the company credits much of that success to gamifying its platform, says SmartyPig co-founder Mike Ferrari. “Let’s face it, saving money is not all that fun,” Ferrari tells Paybefore. “But through the use of gamification mechanics we’ve actually made saving money both fun and rewarding, just like when you were a kid and you’d sock away your pennies.”

What’s Driving Gamification?

The rise of gamification can be linked to a few key factors, says Campbell Edlund, president of EMI Strategic Marketing, a Boston-based company that helps financial services clients implement gamification-style initiatives. “With the challenges facing financial service providers over the economic contraction of the last several years, firms are trying to figure out how to make their products interesting and accessible, while educating consumers on how best to use them,” Edlund tells Paybefore.

Gamification, she says, leverages desires hard-wired into our brains to accomplish these goals. “Games tap into human nature. People like setting goals, they like to compete, they like the notion of earning something or having accomplished something,” notes Edlund. “These fundamental needs are met by games, so a financial service or payment provider can tap that to make their offering easier to understand and adopt, and more fun to use.”

Edlund says gamification can help overcome two major barriers to getting a customer to try a new financial service product: fear and lack of interest. Introducing a new financial services product within a game-like experience helps consumers feel safer and have more fun learning about it—and once they’re using the product, those same game elements can be incorporated into the ongoing usage experience. Providing a safe and thorough education also can be a wise move in the era of increasing regulatory scrutiny, notes Edlund. “Since the financial services meltdown, there’s been a much greater need for companies to demonstrate that they are educating consumers, and gamification is a much more effective way to do that than a series of Webinars,” she says.

Demographics also have played a major role in the rise of gamification, with Generation Y growing up with video games, and thus already attuned to the challenges and rewards that gamification provides. The rise of mobile smartphones and tablets, meanwhile, has provided additional platforms through which providers can establish and continue connections with customers via gamification.

Corporations also have helped drive gamification with in-house applications for their employees. “Companies are increasingly using gamification to accelerate employee training,” Edlund notes, adding that many of EMI’s bank clients have opted to use such in-house training programs as a first dip of the toe into the waters of gamification. “They have been more comfortable testing employee-facing gamification first to get comfortable and then expanding out to customer-facing applications.”

SunTrust Bank, for example, used an EMI-developed, carnival-themed program dubbed “SunTrust Cardival” to enhance employees’ knowledge and confidence in presenting the bank’s credit card products to customers. Within three months, 85 percent of the bank’s employees had undergone the training, and branch sales were at an all-time high.

Creating a Connection, Fine-Tuning the Fun

When it comes to customers, creating long-lasting relationships through ongoing engagement is what gamification is all about, says Arlyn Davich, CEO of PayPerks. But a successful gamification program has to be certain of whom it’s trying to attract and what that audience wants.  “Gamification is a way to increase engagement with consumers at every stage of the funnel, from acquisition to usage to retention, and therefore increase conversion at all of those stages,” Davich tells Paybefore.

Incentives, Davich notes, are a great way to make this connection, but providers must tailor those incentives to appeal to their target markets. “For example, PayPerks is focused on changing behavior of low- and middle-income consumers through sweepstakes-based incentives as chance-based games are shown to be meaningful to that segment,” she says. Because those consumers typically spend less than consumers with higher incomes, they aren’t as interested in rewards that are linked to their overall spend, such as cash back or discounts. Other audiences, more motivated by status, may be more effectively incented through badges that provide social recognition or level advancements that create a sense of achievement.

And it’s not just the form of incentive that must be segment-specific, Davich notes. The delivery mechanism of the “game” also needs to be tailored for each target market. Among the aspects that must be calibrated are: the look and feel of the game interface; whether it’s overtly “game-like” or more staid and straightforward; and the level of difficulty. In fact, not long after PayPerks launched its education platform, the company received feedback that users wanted more of a challenge; rather than earning points for simply answering questions at the end of a segment, many customers said, points should only be awarded for correct answers—otherwise, it was too easy to be enjoyable. “Consumers want to participate in games they perceive as fair to both them and to the provider of the game,” says Davich.

At the end of the day, it comes down to tapping into the primal desires that have driven people to play games for centuries and designing a “game” that your particular audience wants to play. By linking the elements of gaming to specific business objectives, such as educating cardholders about optimal use (that benefits them and you), gamification can drive cardholder engagement and improve program economics.